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Uncategorized Archives - Page 72 of 179 - The National Law Forum

Category: Uncategorized

Amazon Takes Aim at Patent Infringement in its Marketplace

Amazon CEO Jeff Bezos recently disclosed that gross merchandise sales in the Amazon Marketplace by independent third-party sellers (as opposed to sales made directly by Amazon itself) had grown to 58% of total sales. According to data company Statista, 73% of those sellers were small businesses with between 1-5 employees. For many of them, sales on Amazon comprise their entire revenue.

Discussion of the opportunity Amazon Marketplace represents for small business, however, is joined by the voices of many retailers complaining about sales of counterfeit and stolen goods. To better police its online sales, Amazon has launched initiatives such as Project Zero which allows owners of brands to delete counterfeit products.

The online retail giant’s latest enforcement effort—designed to combat patent infringement—has been dubbed the Utility Patent Neutral Evaluation Procedure (UPNEP). Under this new trial program, a company that believes certain products for sale on the Amazon Marketplace infringe its patents can request an evaluation by depositing $4,000. If the seller does not dispute the accusation, Amazon removes the infringing products from the marketplace, and refunds the deposit to the patent owner. If the seller decides to fight the claim, it also deposits $4,000. Amazon then assigns a lawyer with patent expertise to resolve the dispute. The patent owner submits an opening brief, the merchant files a response, and then the patent owner may submit a reply. The lawyer reviews the submissions, and decides whether the listing should be removed or maintained. The winner gets its money back, and the loser’s $4,000 gets paid to the lawyer. There is no discovery, and no appeal or request for reconsideration. The whole process takes just a few months from start to finish.

Many stakeholders in the Amazon ecosystem have applauded the UPNEP as providing both patent owners and Amazon merchants with a quick and cost-effective mechanism for resolving infringement disputes arising from third-party listings. While participation in the program does not prevent a patent owner from commencing a lawsuit, many sellers do not reside in the United States, and thus may not be subject to service of process in a U.S. federal court. Without UPNEP, patent owners would have little to no recourse in such cases.

Law firms with IP litigation expertise are already offering to represent both patent owners and accused sellers in connection with the program. One such firm told The Information that his client boosted sales by 700% after using UPNEP to remove listings that were knockoffs of the client’s patented product. Consultants who advise Amazon sellers are also positioning specialized services. One such consultant advised The Information that a cup manufacturer client had used UPNEP to remove 170 product listings that it believed were infringing its patents.

There are some detractors, however. Deriding the new initiative as “the District of Amazon Federal Court,” Paul Morinville of IP Watchdog says the new initiative is a symptom of a broken patent system. He questions, among other issues, whether the lawyers evaluating the claims will be impartial, or beholden to Amazon’s interests.

Expert Peter Kent, who has served as an expert in several Amazon-related cases, is monitoring developments closely. “A critical question in my mind about the UPNEP program,” explains Kent, “is whether it will be exploited by larger companies trying to knock out competitors using spurious patent claims. For instance, if a small merchant who can’t afford the $4,000 doesn’t respond, their product listings are automatically removed, regardless of the merits of the petitioning company’s patent claims.”

We’ll continue to monitor whether UPNEP—and the model it represents—becomes popular for resolving disputes between patent owners and merchants. With experience on more than 5,000 patent matters in the past decade, proprietary intelligence systems, and the best-in-class network of top experts from complex areas ranging from 5G, artificial intelligence, and virtual reality, IMS stand ready to connect you with the expert best-aligned for your needs.

© Copyright 2002-2019 IMS ExpertServices, All Rights Reserved.

Blocked from Adding Citizenship Question to Census, Administration Moves to Gather Data

President Donald Trump announced that the Administration will not be proceeding with any further census litigation. The 2020 Decennial Census, which is already being printed, will be sent out without a citizenship question. Nevertheless, President Trump does want to obtain statistics on the number of residents in the country who are and are not U.S. citizens. By means of an executive order, he is eliminating “obstacles to data sharing” and asking all government agencies to immediately hand over any and all relevant statistics and numbers to the Commerce Department. The President said that the Commerce Department will use this data, including data from the Social Security Administration and the Department of Homeland Security, to come up with an even more accurate count of citizens, non-citizens, and undocumented individuals than the citizenship question on the census would have yielded. The President indicated that this count will affect an “array of policy decisions” possibly including apportionment.

In his statement, the President made his view clear that people should be proud and glad to declare that they are U.S. citizens. Indeed, USCIS statistics indicate that naturalization applications skyrocketed just prior to the 2016 election – more green card holders want to become U.S. citizens. There are approximately 740,000 pending naturalization applications. In the New York area alone the backlog is anywhere from 12 months to 24 months.  Additional evidence of delays is seen in the number of lawsuits that are being filed in federal district courts due to these unreasonable delays. These lawsuits are at a 10-year high.

In what appear to be further attempts to restrict the processes for obtaining U.S. citizenship, the Administration has suggested that birthright citizenship could be limited, created a task force to “denaturalize” U.S. citizens who may have lied (intentionally or non-intentionally) on the citizenship applications, opposed creating a path to citizenship for DACA and TPS recipients, and been denying passports to individuals by questioning the validity of their birth certificates.

We will continue to follow how the new Commerce Department figures will account for all of the non-citizens who since 2015 have been trying become U.S. citizens and have been blocked by new USCIS policies that have created widespread delays.

 

Jackson Lewis P.C. © 2019
This article was written by Forrest G. Read IV of Jackson Lewis P.C.
For more on the census & citizenship questions, please see the National Law Review Immigration page.

Lessons in Becoming a Second Rate Intellectual Power – Through Privacy Regulation!

The EU’s endless regulation imposed on data usage has spooled over into academia, providing another lesson in kneecapping your own society by overregulating it. And they wonder why none of the big internet companies arose from the EU (or ever will). This time, the European data regulators seem to be doing everything they can to hamstring clinical trials and drive the research (and the resulting tens of billions of dollars of annual spend) outside the EU. That’s bad for pharma and biotech companies, but it’s also bad for universities that want to attract, retain, and teach top-notch talent.

The European Data Protection Board’s Opinion 3/2019 (the “Opinion”) fires an early and self-wounding shot in the coming war over the GDPR meaning and application of “informed consent.” The EU Board insists on defining “informed consent” in a manner that would cripple most serious health research on humans and human tissue that could have taken place in European hospitals and universities.

As discussed in a US law review article from Former Microsoft Chief Privacy Counsel Mike Hintz called Science and Privacy: Data Protection Laws and Their Impact on Research (14 Washington Journal of Law, Technology & Arts 103 (2019)), noted in a recent IAPP story from Hintz and Gary LaFever, both the strict interpretation of “informed consent” and the GDPR’s right to withdraw consent can both cripple serious clinical trials. Further, according to LaFever and Hintz, researchers have raised concerns that “requirements to obtain consent for accessing data for research purposes can lead to inadequate sample sizes, delays and other costs that can interfere with efforts to produce timely and useful research results.”

A clinical researcher must have a “legal basis” to use personal information, especially health information, in trials.  One of the primary legal basis options is simply gaining permission from the test subject for data use.  Only this is not so simple.

On its face, the GDPR requires clear affirmative consent for using personal data (including health data) to be “freely given, specific, informed and unambiguous.” The Opinion clarifies that nearly all operations of a clinical trial – start to finish – are considered regulated transactions involving use of personal information, and special “explicit consent” is required for use of health data. Explicit consent requirements are satisfied by written statements signed by the data subject.

That consent would need to include, among other things:

  • the purpose of each of the processing operations for which consent is sought,
  • what (type of) data will be collected and used, and
  • the existence of the right to withdraw consent.

The Opinion is clear that the EU Board authors believe the nature of clinical trials to be one of  an imbalance of power between the data subject and the sponsor of the trial, so that consent for use of personal data would likely be coercive and not “freely given.” This raises the specter that not only can the data subject pull out of trials at any time (or insist his/ her data be removed upon completion of the trial), but EU Privacy Regulators are likely to simply cancel the right to use personal health data because the signatures could not be freely given where the trial sponsor had an imbalance of power over the data subject. Imagine spending years and tens of millions of euros conducting clinical trials, only to have the results rendered meaningless because, suddenly, the trial participants are of an insufficient sample size.

Further, if the clinical trial operator does not get permission to use personal information for analytics, academic publication/presentation, or any other use of the trial results, then the trial operator cannot use the results in these manners. This means that either the trial sponsor insists on broad permissions to use clinical results for almost any purpose (which would raise the specter of coercive permissions), or the trial is hobbled by inability to use data in opportunities that might arise later. All in all, using subject permission as a basis for supporting legal use of personal data creates unnecessary problems for clinical trials.

That leaves the following legal bases for use of personal data in clinical trials:

  • a task carried out in the public interest under Article 6(1)(e) in conjunction with Article 9(2), (i) or (j) of the GDPR; or

  • the legitimate interests of the controller under Article 6(1)(f) in conjunction with Article 9(2) (j) of the GDPR;

Not every clinical trial will be able to establish it is being conducted in the public interest, especially where the trial doesn’t fall “within the mandate, missions and tasks vested in a public or private body by national law.”  Relying on this basis means that a trial could be challenged later as not supported by national law, and unless the researchers have legislators or regulators pass or promulgate a clear statement of support for the research, this basis is vulnerable to privacy regulators’ whims.

Further, as observed by Hintze and LaFever, relying on “the legal basis involves a balancing test between those legitimate interests pursued by the controller or by a third party and the risks to the interests or rights of the data subject.” So even the most controller-centric of legal supports can be reversed if the local privacy regulator feels that a legitimate use is outweighed by the interests of the data subject.  I suppose the case of Henrietta Lacks, if arising in the EU in the present day, would be a clear situation where a non-scientific regulator can squelch a clinical trial because the data subjects rights to privacy were considered more important than any trial using her genetic material.

So none of the “legal basis” options is either easy or guaranteed not to be reversed later, once millions in resources have been spent on the clinical trial. Further, as Hintze observes, “The GDPR also includes data minimization principles, including retention limitations which may be in tension with the idea that researchers need to gather and retain large volumes of data to conduct big data analytics tools and machine learning.” Meaning that privacy regulators could step in and decide that a clinician has been too ambitious in her use of personal data in violation of data minimization rules and shut down further use of data for scientific purposes.

The regulators emphasize that “appropriate safeguards” will help protect clinical trials from interference, but I read such promises in the inverse.  If a hacker gains access to data in a clinical trial, or if some of this data is accidentally emailed to the wrong people, or if one of the 50,000 lost laptops each day contains clinical research, then the regulators will pounce with both feet and attack the academic institution (rarely paragons of cutting edge data security) as demonstrating a lack of appropriate safeguards.  Recent staggeringly high fines against Marriott and British Airways demonstrate the presumption of the ICO, at least, that an entity suffering a hack or losing data some other way will be viciously punished.

If clinicians choosing where to set human trials knew about this all-encompassing privacy law and how it throws the very nature of their trials into suspicion and possible jeopardy, I can’t see why they would risk holding trials with residents of the European Economic Zone. The uncertainty and risk involved in the aggressively intrusive privacy regulators now having specific interest in clinical trials may drive important academic work overseas. If we see a data breach in a European university or an academic enforcement action based on the laws cited above, it will drive home the risks.

In that case, this particular European shot in the privacy wars is likely to end up pushing serious researchers out of Europe, to the detriment of academic and intellectual life in the Union.

Damaging friendly fire indeed.

 

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.

Federal Circuit Uphold TTAB Ruling on Specimens of Use

Part of the trademark registration process is submitting a specimen of the mark as used in commerce (“specimen of use”). Recently, the U.S. Court of Appeals for the Federal Circuit (CAFC) upheld the decision of a split Trademark Trial and Appeal Board (TTAB) panel that refused to register the trademark “CASALANA” for “knit pile fabric made with wool for use as a textile in the manufacture of outerwear, gloves, apparel, and accessories,” stating that Siny Corp. (the applicant) did not submit an acceptable specimen of use. See In Re: Siny Corp. (Fed. Cir. Case. No. 18-1077).

Siny Corp. had submitted a specimen where the mark was not shown on images of the goods or on images of the packaging. Also, the Siny Corp. website did not allow direct ordering. Instead, it listed a phone number and e-mail “for sales information.” Nonetheless, Siny Corp. maintained that its website qualified as a display of goods at their point-of-sale because its web-page specimen had the phrasing “for sales information” (i.e., it was a “display associated with the goods” that should be considered a specimen of use sufficient to purchase those goods).

During prosecution the examining attorney disagreed with the reasoning of Siny Corp., stating that the phrasing “for sales information” was not enough to enable customers to make the sale. Rather, it was just a way to obtain more information and lacked details to complete the order – such as cost, quantity, payment and shipping.

The TTAB panel, in reviewing the determination of the examining attorney, found that even though Siny Corp. customers would need the support of sales staff because their goods were industrial materials for use in manufacturing, nearly all details needed to complete a transaction were not present on the website. Thus, the website could not be considered a display for point-of-sale.

On appeal to the CAFC, Siny Corp. maintained that its website specimen established a “display associated with the goods” and argued that the Board used “overly rigid requirements” in determining that the specimen did not qualify as a display associated with the goods.

The CAFC agreed with Siny Corp. about the Board holding of In re Sones, 590 F.3d 1282 (Fed. Cir. 2009), cautioning against bright-line rules in this context. However, it disagreed with Siny Corp. that the Board in the instant case had used improperly “rigid” requirements stating, in fact, that the TTAB had prudently considered the website specimen’s contents and ruled the specimen does not cross the line from advertising to suitable display associated with the goods.

In hindsight, the website could have been modified a few ways that may have been acceptable: (1) providing pricing information on the site; (2) providing an e-commerce option to purchase; (3) putting the mark on the images of the goods or on images of the packaging rather than just the surrounding website text; and/or (4) changing the general “for sales information” statement to “call to purchase, pricing available on request.” Alternatively, documentary evidence of the sales process may have been acceptable, showing that purchasing consumers saw the website, called the number, and in fact bought the goods. The foregoing are all considerations to keep in mind when presented with issues regarding specimens which claim use in commerce.

 

Copyright 2019 K & L Gates
Article by Stewart Mesher of K&L Gates.

How Social Media Impacted the Teenage Juul Epidemic: Study Recommends Strict FDA Control

BMJ’s journal, Tobacco Control, just released a study recommending that the FDA do more to control Juul’s e-cigarette advertising in social media. The study included a review of over 15000 posts in a three-month period during 2018. Approximately 30% of reviewed posts were promotional, e.g., leading to Juul purchase locations, and over half the posts included “youth” and “youth lifestyle” themes. Because many of these posts were re-posts or user-generated, rather than ads specifically placed by Juul, the company protested that 99% were third-party content over which Juul had no control. However, the intended goal for social media advertising is to “share” and to inspire creation of third-party user-generated content that is also shared. Juul’s public comments weirdly suggest they don’t understand social media advertising. That is quite unlikely.

Juul first came under fire for its youth-focused advertising back in 2016, but has only recently made changes to restrict it. Not until late 2018, long after being called-out by educational and government agencies for targeting youth, did it begin to materially limit its social media accounts and social media messaging.

Juul’s chief administrative officer, Ashley Gould, was quoted last year telling CNN that Juul was “completely surprised by the youth usage of the product.” (Source: CNN.) In response, Dr. Robert Jackler, founder of the Stanford Research into the Impact of Tobacco Advertising, said, “I don’t believe that, not for a minute, because they’re also a very digital, very analytical company,” he added. “They know their market. They know what they’re doing.”

Gould’s obfuscation about underage users doesn’t fool people in the know—and it certainly doesn’t generate trust that Juul will voluntarily follow ethical practices. Juul only instituted its recent changes to restrict youth advertising after FDA scrutiny and bad press.

Juul also advertises its products are for smoking cessation. Last week, in response to San Francisco’s imminent ban on e-cigarette sales, Juul raised concerns that people would resort back to traditional cigarettes—implying this would further negatively impact the health of San Franciscans.

Unfortunately for Juul, the internet remembers everything. In a 2015 Verge interview at the beginning of Juul’s meteoric rise, one of Juul’s R&D engineers made it clear that Juul didn’t care about smoking cessation nor had any concerns about creating an addictive product. The engineer (Atkins) was quoted saying, “We don’t think a lot about addiction here because we’re not trying to design a cessation product at all,” he said, “anything about health is not on our mind.”

Juul’s public “feint and parry” strategy tends to mirror the traditional tobacco industry—a group with a sordid history of youth-focused advertising, concealment, lying to officials, and purposely creating highly addictive products in order to boost sales. It took multiple lawsuits and the Master Settlement Agreement of the nineties for big tobacco to materially comply with government regulations.

Courtesy of Trinkets & Trash Rutgers School of Public Health

Unfortunately, despite all of that history, the tobacco industry’s disregard for consumer protection has spread into the e-cigarette industry. As late as 2017, big tobacco-owned e-cigarette, Blu, launched its “Something Better” advertising campaign. The campaign mocked government-mandated package warnings on traditional cigarettes. The ads included variations of the following text and were designed to look like cigarette warning labels:

“Important: Contains flavor;”
“Important: Vaping blu smells good”
“Important: No ashtrays needed”

The parody on government-mandated safety warnings mocks consumer protection efforts by government agencies—a tactic not surprising coming from a tobacco company. Right now, there is very little regulation over e-cigarettes despite the fact that the FDA was granted oversight in 2016. Like Blu, Juul also has heavy ties to big tobacco. Altria, parent company to Phillip Morris, the maker of Marlboro, is heavily invested in Juul.

If Juul truly intends to address social media advertising, consumer protection, and youth e-cigarette use, it must do more than spew rhetoric through the media. It must take incisive, prophylactic action to reduce exposure of its products to underage users. If history is any indication, that won’t happen without strict FDA regulation.

If you or someone you know has become seriously addicted to nicotine in e-cigarettes, has health problems associated with e-cigarettes, or has been injured by a malfunctioning e-cigarette, you should contact an experienced e-cigarette injury attorney to advise you on the ability to seek compensation for your injuries.

COPYRIGHT © 2019, STARK & STARK
For more on nicotine product regulation see the National Law Review Consumer Protection page.

“Bikini Baristas” Ordered to Cover-Up

The 9th Circuit court of appeals has enforced the City of Everett, Washington’s Dress Code Ordinance and amendments to the Lewd Conduct Ordinances. These ordinances require employees of “Quick-Service” facilities to cover “minimum body areas” (the dress code ordinance specifically stated that it was targeting an apparent influx of “bikini barista stands”). The owner of “Hillbilly Hotties,” a coffee stand where employees wear only bikinis, and several of the bikini baristas themselves challenged the ordinances as unconstitutionally vague. Plaintiffs also alleged that the Ordinances violated their First Amendment right to free expression.

The Court of Appeals reversed a lower court ruling that prohibited enforcement of the Ordinances on the ground that they are unconstitutionally vague. The appeals court explained that a person of ordinary intelligence would be able to understand the terms in the Ordinance and would be adequately informed of which body areas cannot be exposed or displayed.

The Ninth Circuit also concluded that Plaintiffs’ first amendment claim faltered based upon their failure to show a great likelihood that their intended message would be understood by those who received it. The court found that the baristas’ acts of wearing pasties and g-strings in close proximity to customers did not necessarily convey the baristas’ purported message of female body confidence and empowerment.

Read the full decision here.

 

© 2019 Proskauer Rose LLP.
This article was written by Anthony J Oncidi and Cole D. Lewis of Proskauer Rose LLP.
For more on First Amendment questions please see the National Law Review Constitutional Law page.

Bombas Settles with NYAG Over Credit Card Data Breach

Modern sock maker, Bombas, recently settled with New York over a credit card breach, agreeing to pay $65,000 in penalties.  According to the NYAG, malicious code was injected into Bombas’ Magento ecommerce platform in 2014.  The company addressed the issue over the course of 2014 and early 2015, and according to the NYAG, determined that bad actors had accessed customer information (names, addresses and credit card numbers) of almost 40,000 people. While the company notified the payment card companies at the time, it concluded that it did not need to notify impacted individuals because the payment card companies “did not require a formal PFI or otherwise pursue the matter beyond basic questions.”

In 2018, Bombas updated its cyber program, causing it to “revisit” the incident, deciding to notify impacted individuals and attorneys general. The NYAG concluded that the company had delayed in providing notice in violation of New York breach notification law, which requires notification “in the most expedient time necessary.” In addition to the $65,000 penalty, the company has agreed to modify how it might handle potential future breaches. This includes conducting prompt and thorough investigations, as well as training for employees on how to handle potential data breach matters.

Putting it into Practice: This settlement is a reminder to companies to ensure that they have appropriate measures in place to investigate potential breaches, and understand their notification obligations.

 

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.
For more on financial breaches, please see the Financial Institutions & Banking page on the National Law Review.

Protecting Your Brand and Trademarks in the Cannabis Space Following the 2018 Farm Bill

The 2018 Farm Bill [1] relaxed restrictions covering hemp-based cannabis products, and it is causing a shift in business strategies in the industry. Instead of a full prohibition of trademark registrations covering cannabis goods or services, a narrow range of filings is now permitted, so long as they conform to the requirements of the Farm Bill and the latest USPTO guidelines. While the regulatory framework is still being developed, cannabis-related business owners who could not previously receive federal trademark protection are now reconsidering their trademark strategies.

The principal change from the 2018 Farm Bill is that while all cannabis products derived from marijuana are still prohibited by federal law under the Controlled Substances Act (CSA), those derived from hemp are now permitted, albeit still tightly regulated. Hemp-based cannabis products are defined as those that contain no more than 0.3 percent THC, the primary active ingredient in marijuana. Accordingly, certain products and services derived from hemp are now legal under federal law, and the USPTO has published guidelines that allow narrow federal trademark registrations covering them.

The USPTO had previously refused any trademark application that covered cannabis products or services. In response, many businesses have filed state-law trademark applications in jurisdictions in which marijuana has been legalized, although this provides only limited protection. Businesses have also tried to circumvent the federal prohibition by filing for goods and services tangentially related to marijuana or cannabis, such as apothecary or pharmacy services for medical marijuana, or services for the provision of information and/or advocacy for cannabis and its uses. The policy at the federal level is still to refuse these applications that cover goods and services that are legal on their face but are in fact related to marijuana. But that policy is now moot for certain hemp-related applications that conform to the new guidelines.

Even for applicants that have succeeded in registering trademarks for cannabis-based products under facially legal goods and services descriptions, attempts to enforce these marks can be hollow. During the course of litigation, it may become clear that the activities of the trademark owner are not permitted under federal law. These registrations are still valuable to block other filers as well as to signal that a business is adopting and is willing to enforce a particular mark, but the new USPTO regulations can provide substantially more protection to businesses that sell qualifying hemp-related products or services.

Under the new USPTO guidelines, marks covering hemp-based cannabis products and services are permitted to be registered as long as they contain no more than 0.3 percent THC and are otherwise legal under federal law. Accordingly, there are certain exceptions and requirements, which include the following:

  • The 2018 Farm Bill left jurisdictional responsibility for regulating certain products to the FDA. As of now, the FDA does not permit cannabidiol (CBD) to be sold in food or drug products. Accordingly, registrations for marks that cover “foods, beverages, dietary supplements, or pet treats containing CBD” are still prohibited. This restriction applies only to CBD at this point. Other non-CBD hemp-based food or drug products would be permitted registration so long as they conform to the applicable FDA guidelines. Also, CBD products that are not a food or drug may still be permitted registration as long as they do not fall under the FDA’s jurisdiction or are not otherwise prohibited by other federal laws.  See USPTO Examination Guide 1-19.
  • For marks covering cultivation and other services related to hemp-based products, applications will be examined not only for compliance with applicable USPTO requirements but also for compliance with the 2018 Farm Bill and applicable state laws. Applicants must show that they have an applicable state license to provide their services, as not all states follow the 2018 Farm Bill’s guidance for hemp products, and in many states, these products are still illegal for commercial purposes or highly restricted.[2]

The new guidelines also allow for applicants to amend pending applications covering cannabis products to conform to the new requirements. To do so, the applicant must limit the list of goods and services to products that contain no more than 0.3 percent THC and submit any required documents showing that the goods and services covered are legal. The application’s filing date would also be amended to coincide with the legalization of hemp-based products, and the USPTO would conduct a new search of the register for prior marks to account for the later filing date.

Under the new regulations, cannabis businesses should consult a trademark attorney to consider their options to protect their trademarks on a federal level. Although the law is in flux and uncertainty abounds, there are several points from a trademark-filing strategy perspective to keep in mind when considering filings under the new guidelines:

  • The new, narrow USPTO guidelines will not be helpful to every business operating in the cannabis space. Businesses that will be helped either already offer or are considering offering hemp-derived goods and services that contain less than 0.3 percent THC, goods that do not constitute food or drug products that contain CBD, and goods that are not otherwise in conflict with FDA or other federal laws or guidelines.
  • A large number of trademark applications will likely be filed for hemp-based products soon, regardless of their applicants’ qualifications. Businesses should explore their options and file quickly, and keep in mind that it will be difficult to show prior use to oppose a third-party filer, as any such use was likely illegal under federal law.
  • Because the USPTO can suspend applications for good cause, it is logical to expect the USPTO to grant suspensions of applications while applicants are in the process of obtaining a license to cultivate hemp-based products.
  • Creating even more uncertainty, the 2018 Farm Bill has directed the U.S. Department of Agriculture (USDA) to derive regulations for hemp-related activities that fall outside of the FDA’s jurisdiction. The USPTO is expected to quickly adopt new guidelines to conform to the USDA.
  • Narrowing an existing application to conform to the new requirements will significantly narrow the filing. After such an amendment, the application cannot be amended back to cover the previous broader range of goods and/or services. If an applicant anticipates a change in law and can draw out the application process to wait for such a change, it may be advisable to file a new application that conforms to the new guidelines rather than amending the old one. The applicant can then keep the broader application alive to preserve their options.
  • In some cases, existing registrations may have made it through the examination process, even if they cover goods and services that were prohibited under federal law at the time of filing. If this is a possibility, businesses should consider their options for re-filing based on the new guidelines which on their face do not apply to amending existing registrations.

The new marijuana legalization framework being put in place state by state, most recently in Illinois, has raised more questions than answers in the state-regulatory sphere. However, until now, the federal guidelines were clear, as all cannabis-related products were prohibited under federal law. After the passage of the 2018 Farm Bill, this is no longer the case. As the law in the cannabis sphere unfolds, businesses should work closely with a trademark attorney to explore options for protecting their valuable brands.

© 2019 Dinsmore & Shohl LLP. All rights reserved.
More on Cannabis & Marijuana law developments on the National Law Review Biotech, Food & Drug law page.

Taking Vacation While on Medical Leave: Massachusetts Court Rules on Liquidated Damages Under the FMLA

On June 5, 2019, the Massachusetts Supreme Judicial Court (SJC) issued a decision emphasizing that an employer’s well-designed and thorough internal investigations made prior to a termination decision can provide a strong defense to claims, but less carefully conducted investigations do not.

In DaPrato v. Massachusetts Water Resources Authority, the Massachusetts Water Resources Authority (MWRA) terminated DaPrato’s employment because of its “honest belief” that his family vacation to Mexico during the last two weeks of his Family and Medical Leave Act (FMLA) leave for recovery from foot surgery was an improper use of the leave and warranted termination. The court rejected that position, and clarified the employer’s burden to avoid the award of liquidated damages (i.e., double damages) in claims brought pursuant to the FMLA.

The FMLA states that a judge “shall” award liquidated damages in accordance with statutory provisions if an employer is found liable for violating the FMLA. However, when an employer demonstrates that its conduct was “in good faith and that the employer had reasonable grounds for believing that [its action] was not a violation [of the FMLA]” liquidated damages are in the discretion of the judge and are not mandatory. The MWRA argued such discretionary authority should be available due to a “belief that the employee had misused FMLA leave, even if that belief is mistaken.”

The SJC emphasized that the statute requires employers to act both “in good faith” and on “reasonable grounds.” Applying this standard, the court found that, even though the defendant honestly believed it was complying with the FMLA, it lacked objectively reasonable grounds for such belief. Notably, the SJC found the MWRA’s investigation ignored the employee’s FMLA application and medical records and instead was grounded in “shock, outrage and offense” at the possibility of further FMLA leave for a scheduled knee surgery.

The MWRA’s policy that considered impermissible all vacation taken while on FMLA leave fell short the requirement that it be in good faith and reasonable. The SJC explicitly noted that an employer may not treat the mere fact that an employee went on vacation during FMLA leave, on its own, as impermissible. Instead, a vacation can be permissible or impermissible in terms of consistency with medical leave depending on whether the employee’s conduct while on vacation is consistent with his or her claimed reasons for medical leave. Only when an employer is privy to such information regarding the employer’s conduct may it consider inconsistencies between the conduct and the claimed reasons for leave when evaluating whether leave has been properly or improperly used. Here, a blanket assumption that the employee’s vacation represented an improper use of leave time and the failure to properly investigate left the MWRA unable to obtain a lesser liquidated damages amount.

Key Takeaways

While the decision focused on the narrow “honest belief” exception to liquidated damages in the FMLA, it should remind employers of the importance of objectivity in their investigations. In the context of an FMLA investigation, DaPrato reminds employers to ensure that they avoid decisions that are “honest but unconsciously biased” where, as here, the employer mistakenly believed an employee on FMLA leave could not legitimately take a vacation. Only by satisfying both the good faith and reasonableness requirements—which in this case mandated knowledge of the law surrounding employee use of vacations while on FMLA leaves—could this employer have avoided liquidated damages. Thus, DaPrato should prompt employers to be even more cautious when discharging employees for perceived misconduct and ensure their internal investigations are thorough, fair, and objective.

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more on FMLA policies see the National Law Review page on Labor & Employment.

Is Electric Scooter Safety Next on the Regulatory Menu?

A few years ago, hoverboards drew a lot of attention from the U.S. Consumer Product Safety Commission (CPSC). Formally known as self-balancing electric scooters, hoverboards became an instant success because they combined practical mobility and enjoyment. But that success was not without some setbacks. When news stories in 2015 linked hoverboards to fires (which we wrote about here), the same popularity that drove sales also attracted public and government scrutiny.

While the CPSC typically does not discuss ongoing investigations, in January 2016, the attention around hoverboards drove then-Chairman Elliot Kaye to make public statements about the agency’s inquiries. And in February 2016, then-Acting Director of Compliance Robert Howell issued a public letter to manufacturers, urging them to test their products according to Underwriters Laboratories (UL) 2272, which would not become a formal voluntary consensus standard for another nine months. These statements were unusual. The public and congressional attention on alleged hoverboard fires drove the CPSC to be more public in its efforts.

Poised for the Next New Thing

With the hoverboard memory fresh in its mind, the CPSC is likely to get ahead of future potential emerging technology issues. One product that the agency may see as ripe for early intervention is a cousin of hoverboards: electric scooters. We last wrote about how scooter manufacturers have provided a roadmap for other technology companies to respond to complaints. Scooters share some features of regulatory interest with hoverboards – they’re both powered by lithium ion batteries, for instance – but they also have some unique features. Specifically, the wildly popular scooter-sharing rental model means scooters carry riders with varying levels of ability and knowledge about the product, presenting companies with the challenge of addressing rider safety without a readily available opportunity to warn or instruct them on scooters’ use.

Scooters are everywhere in many cities, creating both opportunities and litigation challenges for companies. States and municipalities have struggled to figure out how they can address the safety of riders and others, including pedestrians, cyclists, and motorists. They have set a variety of rules on issues like how many scooters can operate, where they can go, and how fast they can move. Some cities are testing the waters carefully, using pilot programs to see how scooters could integrate with other modes of transport. These debates are usually about how scooter riders should ride – the rules of the road/sidewalk – but not about how scooters should be designed and built.

The CPSC has the authority to regulate the safety of scooters. In addition to the question of battery safety, CPSC staff and commissioners have expressed concerns about falls or other mechanical hazards, such as the consequences of potential structural failures. And while the agency is engaged, so far its activities have been modest. CPSC staff have collaborated on UL 2272 since it was issued in 2016. The standard now includes electric scooters under the term “Light Electric Vehicles,” but the standards committee has not adopted any scooter-specific provisions.

However, consumer advocacy groups are asking the government to pay more attention to allegations of injuries associated with scooters, which may pressure the CPSC to be more assertive. The Consumer Federation of America (CFA) has urged the agency to conduct more research and seek recalls of scooters associated with injuries. The CFA has also asked Congress to give the CPSC a nudge. So far, groups like the CFA have not called for a mandatory product safety standard, but that possibility always exists.

How Scooter Companies Can Engage the CPSC

What’s going on in Washington presents scooter companies with the opportunity to ensure their voices are heard in these conversations. As with any CPSC-regulated industry, companies should comply with their obligations to report potential hazards and, as appropriate, recall products. Some companies have already conducted recalls, though seemingly without the CPSC’s public involvement. Companies should also continue to go beyond these case-by-case actions and ensure product safety issues are on their policy agenda in conversations with the CPSC, Congress, and other stakeholders.

For example, companies may want to set up introductory meetings with CPSC commissioners to build positive working relationships long before commissioners have a vote on a recall or a rule. Scooter companies may also want to engage at safety-related events to present themselves as thoughtful, responsible innovators.

Companies should also maintain their active involvement in voluntary standards bodies, namely with UL with respect to its 2272 standard on hoverboard and scooter electrical systems. Voluntary standards both help protect consumers and protect responsible companies against undercutting by less safety-minded market players. Currently, safety practices vary between companies. More uniformity can build consumer confidence and help establish the kind of “reasonably prudent company” benchmark that is key to litigation defense. Moreover, when companies work alongside the CPSC’s technical experts on the voluntary standards, they can build trust and rapport that can help future discussions.

Electric scooters are not going away. Their enormous potential in urban transportation is too valuable. But discussions about how to regulate scooters are just getting started. Scooter companies should make sure they are seated at the table; that is, as always, the best way to avoid being on the menu.

 

© 2019 Schiff Hardin LLP
More on CPSC regulation in the National Law Review Consumer Protection page.